Commission Regulation (EU) 2016/631 of 14 April 2016 establishing a network code on requirements for grid connection of generators (NC RfG), as other network codes implemented under the Third Energy Package, takes the form of the Europe-wide binding regulation and, as such, prevails over the EU Member States‘ national provisions.

However, if compatible with the provisions in the European network code(s), national codes, standards and regulations which are more detailed or more stringent than the respective European network code(s) will retain their applicability.

Moreover, additional measures remaining within the scope of the network code can, as a matter of principle, be taken at the national level provided that they do not contradict the provisions of the network code.

NC RfG was recommended by ACER to the European Commission in 2013 and on 26 June 2015 was unanimously approved by representatives of the EU Member States.

The date of full application, as per the code requirements, is three years after the entry into force. The NC RfG entered into force on 17 May 2016, but only a very small part of these provisions apply before 27 May 2019.

These three years can be grouped in two main parts: the first two years will be used by the Member States to assimilate the NC RfG in their national provisions, and the last year will be used by the impacted parties to comply with the Network Code requirements.

Impact of the NC RfG on the existing energy market arrangements

Article 6(4) of the NC RfG

Except for requirements under paragraphs 2 and 4 of Article 13 or where otherwise stated in the national framework, requirements of this Regulation relating to the capability to maintain constant active power output or to modulate active power output shall not apply to power-generating modules of facilities for combined heat and power production embedded in the networks of industrial sites, where all of the following criteria are met:

(a) the primary purpose of those facilities is to produce heat for production processes of the industrial site concerned;

(b) heat and power-generating is inextricably interlinked, that is to say any change of heat generation results inadver­tently in a change of active power-generating and vice versa;

(c) the power-generating modules are of type A, B, C or, in the case of the Nordic synchronous area, type D in accordance with points (a) to (c) of Article 5(2).

The first thing is that NC RfG applies to Power Generating Modules, which are considered significant (as such are defined units on the basis of their impact on the cross-border system performance via influence on the control area's security of supply - Article 5 of the NC RfG - see below).

Among other preliminary key issues from the perspective of the impact of the NC RfG on the existing energy market arrangements are:

Whether a Power Generating Module is defined as an Existing Power Generating Module in the context of the NC RfG depends on the date of its connection or on the finality of binding contracts its owner may have on the purchase of the main plant and which can be confirmed.

As requested by the ACER Framework Guidelines, the network code applies in principle to New Power Generating Modules.

It applies, however, to Existing Power Generating Modules as well, if this has been proposed by the relevant Transmission System Operator (TSO) on a national level and this proposal has been approved by the National Regulatory Authority (Article 4 of the NC RfG).

Recital 8 of the NC RfG

In view of the need to provide regulatory certainty, the requirements of this Regulation should apply to new generating facilities but should not apply to existing generating modules and generating modules already at an advanced stage of planning but not yet completed unless the relevant regulatory authority or Member State decides otherwise based on evolution of system requirements and a full cost-benefit analysis, or where there has been substantial modernisation of those generating facilities.

Depending on the proposal by the relevant TSO (and the regulator’s approval) there can be a variety of application to Existing Power Generating Modules:

Once approved and applied to a certain Existing Power Generating Module, this unit shall meet those requirements which are covered by this approval without any exemption, regardless whether it possesses a derogation from this requirement, which was issued on a national level before the network code entered in force.

NC RfG, Articles 3 and 4

Article 3Scope of application

1. The connection requirements set out in this Regulation shall apply to new power-generating modules which are considered significant in accordance with Article 5, unless otherwise provided.The relevant system operator shall refuse to allow the connection of a power-generating module which does not comply with the requirements set out in this Regulation and which is not covered by a derogation granted by the regulatory authority, or other authority where applicable in a Member State pursuant to Article 60. The relevant system operator shall communicate such refusal, by means of a reasoned statement in writing, to the power-generating facility owner and, unless specified otherwise by the regulatory authority, to the regulatory authority.

2. This Regulation shall not apply to:

(a) power-generating modules connected to the transmission system and distribution systems, or to parts of the transmission system or distribution systems, of islands of Member States of which the systems are not operated synchronously with either the Continental Europe, Great Britain, Nordic, Ireland and Northern Ireland or Baltic synchronous area;

(b) power-generating modules that were installed to provide back-up power and operate in parallel with the system for less than five minutes per calendar month while the system is in normal system state. Parallel operation during maintenance or commissioning tests of that power-generating module shall not count towards the five-minute limit;

(c) power-generating modules that do not have a permanent connection point and are used by the system operators to temporarily provide power when normal system capacity is partly or completely unavailable;

1. Existing power-generating modules are not subject to the requirements of this Regulation, except where:

(a) a type C or type D power-generating module has been modified to such an extent that its connection agreement must be substantially revised in accordance with the following procedure:(i) power-generating facility owners who intend to undertake the modernisation of a plant or replacement of equipment impacting the technical capabilities of the power-generating module shall notify their plans to the relevant system operator in advance;(ii) if the relevant system operator considers that the extent of the modernisation or replacement of equipment is such that a new connection agreement is required, the system operator shall notify the relevant regulatory authority or, where applicable, the Member State; and(iii) the relevant regulatory authority or, where applicable, the Member State shall decide if the existing connection agreement needs to be revised or a new connection agreement is required and which requirements of this Regulation shall apply; or

(b) a regulatory authority or, where applicable, a Member State decides to make an existing power-generating module subject to all or some of the requirements of this Regulation, following a proposal from the relevant TSO in accordance with paragraphs 3, 4 and 5.

2. For the purposes of this Regulation, a power-generating module shall be considered existing if:(a) it is already connected to the network on the date of entry into force of this Regulation; or(b) the power-generating facility owner has concluded a final and binding contract for the purchase of the main generating plant by two years after the entry into force of the Regulation. The power-generating facility owner must notify the relevant system operator and relevant TSO of conclusion of the contract within 30 months after the entry into force of the Regulation.

The notification submitted by the power-generating facility owner to the relevant system operator and to the relevant TSO shall at least indicate the contract title, its date of signature and date of entry into force and the specifications of the main generating plant to be constructed, assembled or purchased.

A Member State may provide that in specified circumstances the regulatory authority may determine whether the power-generating module is to be considered an existing power-generating module or a new power-generating module.

3. Following a public consultation in accordance with Article 10 and in order to address significant factual changes in circumstances, such as the evolution of system requirements including penetration of renewable energy sources, smart grids, distributed generation or demand response, the relevant TSO may propose to the regulatory authority concerned, or where applicable, to the Member State to extend the application of this Regulation to existing power-generating modules.

For that purpose a sound and transparent quantitative cost-benefit analysis shall be carried out, in accordance with Articles 38 and 39. The analysis shall indicate:(a) the costs, in regard to existing power-generating modules, of requiring compliance with this Regulation;(b) the socioeconomic benefit resulting from applying the requirements set out in this Regulation; and(c) the potential of alternative measures to achieve the required performance.

4. Before carrying out the quantitative cost-benefit analysis referred to in paragraph 3, the relevant TSO shall:(a) carry out a preliminary qualitative comparison of costs and benefits;(b) obtain approval from the relevant regulatory authority or, where applicable, the Member State.

5. The relevant regulatory authority or, where applicable, the Member State shall decide on the extension of the applicability of this Regulation to existing power-generating modules within six months of receipt of the report and the recommendation of the relevant TSO in accordance with Article 38(4). The decision of the regulatory authority or, where applicable, the Member State shall be published.

6. The relevant TSO shall take account of the legitimate expectations of power-generating facility owners as part of the assessment of the application of this Regulation to existing power-generating modules.

7. The relevant TSO may assess the application of some or all of the provisions of this Regulation to existing power-generating modules every three years in accordance with the criteria and process set out in paragraphs 3 to 5.

In respect of the network codes, such former derogations are invalid.

Derogations will have to be sought specifically from the requirements of the network code by applying for them according to the procedure for derogation defined in Article 60 of the NC RfG.

However, Existing Power Generating Modules, which are not covered by the network code, shall continue to be bound by such technical requirements that apply to them pursuant to legislation in force in the respective Member States or contractual arrangements in force.

Consequently, existing national/local derogations may remain in force as well, provided that they refer to a requirement not covered by the EU network code.

Although existing derogations are not suitable evidence of derogation from the network code in case of application to Existing Power Generating Modules, such documentation can however provide useful background information when preparing the derogation application regarding the network code.

Given the importance of the above circumstances the generators mustn't neglect them. Why? The problem is linked to financial burden. ENTSO-E answer to the FAQ 13 (Why does the network code not specify who pays for improvements of Existing Power Generating Modules to become compliant with the requirements? Who bears the costs for demonstrating compliance?) clears same ambiguities in that regard.

ENTSO-E observes firstly that cost allocation of improvements is not covered specifically by the framework guidelines on electricity grid connection issued by ACER.

The ACER Framework Guidelines state that “[t]he network code(s) shall always require the system operators to optimise between the highest overall efficiency and lowest total cost for all involved stakeholders. In that respect, NRAs shall ensure, that, whatever the cost-sharing scheme is, the cost split follows the principles of non-discrimination, maximum transparency and assignment to the real originator of the costs.”

Improvements of existing Power Generating Facilities and equipment to achieve compliance with the network code based on TSO proposal can only be mandated after a cost-benefit analysis which is performed on a socio-economic level (see FAQ 11) in line with the framework guidelines.

Nevertheless, in case of replacement/improvements/modernisation of existing Power Generating Facilities, it is required that the replaced/improved/modernised installations are compliant with the requirements of the network code, unless the Power Generating Facility owner applies for a derogation from this obligation and this derogation is granted by the relevant network operator.

The responsibility on demonstrating compliance with the requirements established in the network code relies on the Power Generating Facility owners. Consequently they shall bear their costs related to compliance tests and simulations. This should be done in alignment with the compliance principle set out in this network code and detailed further at a national level.

Among other fundamental issues impacting nearly all remaining provisions of the NC RfG is the question whether the technology-neutral approach should be adopted in the code.

ACER’s opinion of 13 October 2012 on NC RfG acknowledges the principle of uniform application of the requirements regardless of the generation technology, however, it can be anticipated that there may arise further controversies in that regard.

Pursuant to the ENTSO-E assumptions adopted at present major differences in the capability requirements of Power Generating Facilities do not result from the primary energy source used (wind, solar, gas, coal, nuclear, hydro, etc.) for conversion into electricity, but from the type of generator connected to the network, in particular whether the generator is synchronously connected to the grid (like for the vast majority of conventional thermal Power Generating Modules) or via a power converter installation (like for wind farms or PV installations).

Therefore three categories of requirements are distinguished in the NC RfG:

- general requirements, which apply to all PGMs, regardless of the type of connection, because they are not influenced by it;

Exhaustive/non-exhaustive and mandatory/non-mandatory requirements of the NC RfG

Non-exhaustive requirements are those for which the European level network codes do not contain all the information or parameters necessary to apply the requirements immediately and need further national specifications for its entire application in general on national level or as a site-specific choice.

Non-exhaustive requirements of the NC RfG are listed in the ENTSO-E Guidance document for national implementation for network codes on grid connection, Parameters of Non-exhaustive requirements, Draft for consultation 1 July -15 August 2016, 22 June 2016, p. 5 - 12.

The ENTSO-E document of 22 June 2016 (Making non-mandatory requirements at European level mandatory at national level, ENTSO-E Guidance document for national implementation for network codes on grid connection, Draft for consultation 1 July -15 August 2016) refers in that regard to the following examples of provisions having different character in the NC RfG:

Under Article 58 of the NC RfG ENTSO-E has the power to issue non-binding guidance on NC RfG (Implementation Guidance Document - IGD).

NC RfG Article 58

Non-binding guidance on implementation

1. No later than six months after the entry into force of this Regulation, the ENTSO for Electricity shall prepare and thereafter every two years provide non-binding written guidance to its members and other system operators concerning the elements of this Regulation requiring national decisions. The ENTSO for Electricity shall publish this guidance on its website.

Differentiation by type of Power Generating Modules implemented by the NC RfG has a broader context and influences on terminology used by other network codes, and, equally, on other classifications of generation sources used in legal documentation.

Recitals 9 and 10 of the NC RfG

(9) The significance of power-generating modules should be based on their size and their effect on the overall system. Synchronous machines should be classed on the machine size and include all the components of a generating facility that normally run indivisibly, such as separate alternators driven by the separate gas and steam turbines of a single combined-cycle gas turbine installation. For a facility including several such combined-cycle gas turbine installations, each should be assessed on its size, and not on the whole capacity of the facility. Non-synchronously connected power-generating units, where they are collected together to form an economic unit and where they have a single connection point should be assessed on their aggregated capacity.

(10) In view of the different voltage level at which generators are connected and their maximum generating capacity, this Regulation should make a distinction between different types of generators by establishing different levels of requirements. This Regulation does not set the rules to determine the voltage level of the connection point to which the power-generating module shall be connected.

The connection requirements set out in the NC RfG apply to Power-Generating Modules which are considered significant, unless otherwise provided.

Determination of significance unfolds in accordance with Article 5 of the NC RfG.

NC RfG defines the requirements applicable to Power Generating Modules by placing generators into one of four 'types' A-D.

These categories are based on the maximum capacity of the Power Generating Module and its connection voltage level.

NC RfG defines the limit for maximum capacity threshold of types B, C and D for each of the 5 synchronous areas in Europe.

The capacity thresholds are defined as upper limits of the lower threshold leaving the final determination of this threshold to the national level.

The upper limits have been chosen from an estimation of having sufficient generation capacity of each category and the corresponding capabilities available for secure system operation.

Consequently, the breakdown by type of Power Generating Modules defined in the NC RfG is as follows:

Type A

A Synchronous Power Generating Module or Power Park Module is of Type A if its Connection Point is below 110 kV and its Maximum Capacity is 0.8 kW or more.

ENTSO-E FAQ document of 19 June 2012 explains, Type A requirements are the basic level requirements, necessary to ensure capability of generation over operational ranges with limited automated response and minimal system operator control of generation. They ensure there is no wide scale loss of generation over system operational ranges, thereby minimising critical events, and requirements necessary for wide spread intervention during system critical events.

Only essential requirements are included for Type A, limited to those aspects with potential system wide implications. For new installations, there is normally little or no additional cost in complying with these requirements once introduced as part of the standard product. See more on Type A Power Generating Modules

Type B

A Synchronous Power Generating Module or Power Park Module is of Type B if its Connection Point is below 110 kV and its maximum capacity is at or above a threshold defined by the relevant TSO and approved by the competent regulatory authority. This threshold must not be above the threshold for Type B Power Generating Modules according to the table below.

Type B requirements provide a wider level of automated dynamic response (generally with settings by the relevant network operator) with higher resilience to more specific operational events to ensure use of this higher dynamic response and a higher level system operator control and information to utilise these capabilities. They ensure automated response to alleviate and maximise dynamic generation response to system events, greater generator resilience of these events to ensure this dynamic response and better communication and control to leverage these capabilities. See more on Type B Power Generating Modules

Type C

A Synchronous Power Generating Module or Power Park Module is of Type C if its Connection Point is below 110 kV and its maximum capacity is at or above a threshold defined by the relevant TSO and approved by the competent regulatory authority. This threshold must not be above the threshold for Type C Power Generating Modules according to the table below.

Type C requirements provide refined, stable and highly controllable (real time) dynamic response to provide principle balancing services to ensure security of supply. These requirements cover all operational network states with consequential detailed specification of interactions of requirements, functions, control and information to utilise these capabilities. They ensure real time system response necessary to avoid, manage and respond to system events. These requirements provide sufficient generation functionality to respond to both intact and system disturbed situations, and the need for information and control necessary to utilise this generation over this diversity of situations. See more on Type C Power Generating Modules

Type D

A Synchronous Power Generating Module or Power Park Module is of Type D if its Connection Point is at 110 kV or above; a Synchronous Power Generating Module or Power Park Module is of Type D as well if its Connection Point is below 110 kV and its maximum capacity is at or above a threshold defined by the relevant TSO and approved by the competent regulatory authority. This threshold must not be above the threshold for Type D Power Generating Modules according to the table below.

Type D requirements cover a wide area of control and range of operation. They ensure specific needs for higher voltage (equal to or greater than 110kV) networks and their operation and stability over wide areas, allowing the use of ancillary services from generation Europe wide. For this reason the requirements apply also for large generation connected at a lower voltage, but above a given capacity threshold. See more on Type D Power Generating Modules

Limits for thresholds for type B, C and D Power Generating Modules

Article 5 of the NC RfG defines the application of the thresholds contained in Table 1 of that Article based on the capacity of Power Generating Modules.

Article 5 of the NC RfG

Determination of significance

1. The power-generating modules shall comply with the requirements on the basis of the voltage level of their connection point and their maximum capacity according to the categories set out in paragraph 2.

2. Power-generating modules within the following categories shall be considered as significant:

(a) connection point below 110 kV and maximum capacity of 0,8 kW or more (type A);

(b) connection point below 110 kV and maximum capacity at or above a threshold proposed by each relevant TSO in accordance with the procedure laid out in paragraph 3 (type B). This threshold shall not be above the limits for type B power-generating modules contained in Table 1;

(c) connection point below 110 kV and maximum capacity at or above a threshold specified by each relevant TSO in accordance with paragraph 3 (type C). This threshold shall not be above the limits for type C power-generating modules contained in Table 1; or

(d) connection point at 110 kV or above (type D). A power-generating module is also of type D if its connection point is below 110 kV and its maximum capacity is at or above a threshold specified in accordance with paragraph 3. This threshold shall not be above the limit for type D power-generating modules contained in Table 1.

Table 1

Limits for thresholds for type B, C and D power-generating modules

Synchronous Area

Limit for maximum capacity threshold from which on a Power generating module is of type B

Limit for maximum capacity threshold from which on a power generating module is of type C

Limit for maximum capacity threshold from which on a power generating module is of type D

Continental Europe

1 MW

50 MW

75 MW

Great Britain

1 MW

50 MW

75 MW

Nordic

1.5 MW

10 MW

30 MW

Ireland and Northern Ireland

0.1 MW

5 MW

10 MW

Baltic

0.5 MW

10 MW

15 MW

3. Proposals for maximum capacity thresholds for types B, C and D power-generating modules shall be subject to approval by the relevant regulatory authority or, where applicable, the Member State. In forming proposals the relevant TSO shall coordinate with adjacent TSOs and DSOs and shall conduct a public consultation in accordance with Article 10. A proposal by the relevant TSO to change the thresholds shall not be made sooner than three years after the previous proposal.

5. If, as a result of modification of the thresholds, a power-generating module qualifies under a different type, the procedure laid down in Article 4(3) concerning existing power-generating modules shall apply before compliance with the requirements for the new type is required.

As ENTSO-E guidance document for national implementation for network codes on grid connection, Selecting national MW boundaries, Draft for consultation 1 July -15 August 2016, 30 June 2016, underlines, as part of the national implementation of NC RfG, the relevant TSO of each Member State needs to set banding thresholds within these maximum values – and so have a choice between applying the maximum MW boundaries as defined in the above Table or, where it is reasonable (e.g. to maintain for new generators capabilities which currently already apply to existing generators for reasons of system security), choosing lower values.

Periodical review of thresholds

In order to take into consideration of the evolution of power supply systems and the corresponding change of system characteristics and performance, NC RfG allows to review periodically the threshold points between the types of generators.

The thresholds may change based on the evolution of the system due to different reasons like increasing penetration of renewable energy sources usually combined with a change from bulk generation by synchronous generators at transmission level towards embedded generation at distribution level often connected through power electronics, or increased cross border reliance.

The code sets out that the thresholds cannot be changed more frequently than every three years after the previous proposal.

When such a change is made it will apply by default to new generators going forwards and the date of application to new generators has also to be determined at national level, taking account of the process applied when the code has been introduced.

Changes can also apply retrospectively but only where the process for retrospective application (Article 4(3) of RfG) is followed.

In this case only, and in accordance with Article 4(3), a cost-benefit analysis (CBA) is required, but only to apply any revised requirements to existing generators.

NC RfG vs. ancillary services

Among key considerations is whether in the NC RfG can be found some important requirements influencing potential generators' revenues from ancillary services. In that regard ENTSO-E answer to FAQ 12 clarifies as follows:

"It needs to be well distinguished between mandatory requirements of capabilities and the provision of ancillary services based on these capabilities. ENTSO-E agrees with stakeholders, that the provision of ancillary services is basically a market-related issue which needs to be appropriately remunerated. However, the introduction of remuneration provisions shall be subject to other network codes or arrangements."